Microsoft has allegedly approached AMD and shown interest in acquiring the company according to a recent report citing an anonymous source. Rumors of potential AMD acquisitions by larger industry players are anything but rare occurrences. Such rumors however have been particularly more prevalent than usual in more recent times. According to a report by KitGuru, Microsoft had already approached the Sunnyvale chip maker, AMD, several months ago, however the results of the discussions are unknown.

AMD already supplies the hardware for Microsoft’s XBOX One gaming console as well as its main rival the Playstation 4 from Sony. The Redmond based software giant and the Sunnyvale based chip maker have maintained a close relationship for a very longtime. In fact they have worked together on multiple generations of Microsoft’s graphics programming interface, DirectX, as well as some of the company’s previous generations of gaming devices such as the XBOX 360. Despite the common interests that both companies share in the PC market and gaming, they actually address these markets through a vastly different set of tools, expertise and perspectives.

One’s a predominantly software giant that has dabbled in hardware in more recent times but with fairly limited success. While the other is a component maker that specializes in cutting edge graphics and general purpose microprocessors and has only dabbled with software recently, again with fairly limited success. This might therefore seem like a match made in heaven, but it’s far from it.

Anyone who’s been around long enough will know that company acquisition rumors are a dime a dozen. And anyone who’s managed to follow the PC industry for long enough will know that dozens of rumors such as the one have have proven to have had very little to nothing to do with reality. So it’s important to highlight some of the glaring issues around this specific rumor before speculation starts to run wild.

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Not too long ago Microsoft faced a number of serious allegations over monopoly concerns. The company even ended up fighting against litigation from the United States government over this issue. In fact, a judge issued in his court’s findings of fact that he had found Microsoft’s dominance of the x86 market had constituted a monopoly.
A premise in which Microsoft buys AMD and attempts to sell Windows systems powered by its microprocessors and graphics chips will inevitably raise these concerns again. A Microsoft that owns AMD can’t simply make and sell personal computers with components made from the IP of the latter without It unearthing these concerns once again. And this time it would not only involve the US government but also two industry giants that will undoubtedly fight tooth and nail to protect their business.

It not only puts Microsoft in the unenviable position of competing directly with microprocessor and graphics leaders Intel and Nvidia, in a hardware market that Microsoft has no prior experience in what so ever. But it does so while putting the company in a position where any advantage it could potentially gain from owning AMD’s graphics and microprocessor IP would completely dissipate.

While Microsoft can certainly afford to buy AMD out there’s no clear sense in doing so. Corporate acquisitions are made to embolden a company’s standing competitive stance, explore greenfield opportunities and fuel growth. Not to open several fronts in mature hyper-competitive markets with established market leaders. Microsoft maybe able to achieve some of the former with this acquisition, but it definitely can’t do it without incurring the latter.

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